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Information on closing credit cards and effect on credit score - The Bills.com Blog
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Information on closing credit cards and effect on credit score
Question: I have paid 2 of my Capital One cards off and pay a membership fee on both. The bank I got a loan from said they would close the accounts for me. I am confused. I have had these cards for a while and I am afraid my score will be effected.
Answer: At times, the bank lending you the money to consolidate the debt will insiston making payments to the creditors directly, in which case you are required to give your account numbers to the company and then they will disburse the amount that you owe to the creditors. Only you, the person who opened the account can request for it to be closed because it is you who signed the contract. I would suggest that you call the bank that you took the loan from to clarify. Are they only suggesting, or are they insisting you close the accounts? The bank cannot force you to close the accounts.
While having too many accounts does have a negative impact on your credit, if these are the only accounts you have, and also because you state that you've
had the accounts open for a while, closing the accounts is not a good idea. Instead, to control the spending, you can just cut up the cards and leave the accounts in open status.
A big part of your FICO credit score (about 30%) is determined by the ratio of how much you owe to how much credit you have available. The lower the ratio, the higher your score. The more you have available and unused, the lower your ratio will be. Apparently, it is a good sign if you can responsibly handle a high credit limit.
Another factor (about 15%) of your credit score is the average age of your accounts. The longer your accounts are open, the higher your score. So if you
leave the credit cards alone, they'll build your score over time just by being there.
So if you're in a position where you can handle the credit limits, and where your credit score is important to you (if you own your house and don't ever plan on going into debt again for cars, college, or the like, it may not matter!), consider leaving your old accounts open.
You can read more about credit scores on our website at: http://www.bills.com/credit-score/. I hope the information I have provided, helps you Find. Learn. Save.
Best,
Bill
www.bills.com
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